Dissident Voice

August
25, 2003

On
mid-day Thursday, Aug. 14, a coal-fired power plant in northeastern Ohio
stopped running. In response, FirstEnergy, which owns the plant, began to pull
20 percent of its electricity load out of Michigan. This transfer overloaded
several transmission lines, causing them to trip. Non-FirstEnergy plants in
Ontario, Canada, began supplying energy to the underpowered Michigan market, leading
to an overload on those transmission lines. This movement of power in Canada
sapped New York of power, within hours leading to the largest blackout in U.S.
history.

Electricity
deregulation was the catalyst, but FirstEnergy was the immediate culprit for
the massive power blackout that shut down much of the Midwest and Northeast
last week. FirstEnergy delivers electricity to more than 4 million people in
Ohio, Pennsylvania and New Jersey. Although industry analysts blame the
Ohio-based energy conglomerate for the power outage, the Bush administration is
silent. FirstEnergy's strong ties to the president helps to explain why the
Department of Energy (DOE) may downplay the company's role in the blackout.

FirstEnergy
started the problem, why shouldn't the company be held responsible? Because the
Bush administration wants to absolve corporate America from responsibility.

And
thanks to its cozy relationship with President Bush, FirstEnergy may get a free
pass. The company is a big donor to the White House. In June, the company’s CEO
hosted a fundraiser that brought in $600,000 for the Bush-Cheney re-election
campaign. Another FirstEnergy executive, president Anthony J. Alexander, gained
distinction in 2000 by raising $100,000 for the Bush-Cheney campaign and
personally donating another $100,000. When Bush took office, Alexander was
included on the Energy Department's transition team. In the electricity utility
industry, FirstEnergy's PAC and its top executives are the sixth-largest contributors
to political campaigns, giving more than $1 million to federal candidates in
2001-2002, with 70 percent of the money going to Republicans. FirstEnergy
wields enormous lobbying influence in Congress as well. In 2001-2002, the
company spent nearly $3.8 million lobbying Congress and the Bush
administration.

FirstEnergy,
Deregulation and the Bush Administration

FirstEnergy
may have spurred the power outage, but deregulation deserves the overall blame.
Long before the August blackout, the Bush administration pursued a policy of
energy deregulation, and now that policy has come back to haunt us.

Bush's
energy deregulation makes America vulnerable for two reasons. First, the United
States' transmission system was designed to accommodate local electricity
markets. Under deregulation, however, companies trade electricity and move
power over much longer distances and wider areas. This freewheeling approach to
sending power strains a transmission system designed to serve local utilities.

Second,
deregulation leads to inadequate investment in infrastructure. Deregulation at
the state level means that utilities are no longer required to reinvest
ratepayer money back into the transmission system, as this orderly planning has
been replaced with reliance on "the market." But the market has been
unwilling to make the necessary investments in transmission.

In
particular, the market has not functioned properly since lawmakers punched
loopholes in the federal law intended to protect electricity consumers. Now, the
Public Utility Holding Company Act(PUHCA) faces the likelihood of full repeal
by Republicans in Congress. PUHCA regulates giant energy companies by requiring
them to disclose crucial financial details and limiting the types of
non-electricity investments they may make. If PUHCA is repealed, a wave of
mergers will likely result, leaving a handful of companies (like Southern Co.,
ExxonMobil and FirstEnergy) in control of our electricity -- with no effective
regulators looking over their shoulders.

In
the case of the August blackouts, the deregulated wholesale markets of the
Midwest and Northeast -- typically cited as models for national deregulation by
the Federal Energy Regulatory Commission (FERC) -- failed in their ability to
provide reliable and affordable power. As a result, wholesale prices remain
higher than under regulation, and nearly 96 percent of the 40 million
residential consumers in the remaining 15 deregulated states lack access to
competitive electricity suppliers.

This
is the world of energy the Bush administration and its financial supporters
envisioned. Of course, no one wanted a regional blackout. But no one was there
to prevent it, either.